TAX CUT DEBATE MYTHS AND FACTS
By Robert Weiner and Varun Saxena
A lot of rhetoric is flying in the November election but perhaps the most substantive debate is over whether to continue tax breaks for the rich. President Obama and most congressional Democrats want to extend the Bush tax cuts for 98% of Americans, everyone making under $250,000. Republicans want to extend the tax cuts for everybody despite a provision in Bush's 2001 tax bill to suspend the tax cuts at the end of 2010 in order to restore needed revenue. If nothing is done, everyone's taxes will rise.
The issue may be taken up in the November lame duck session if the Senate filibuster is broken.
Retiring Senator and long-time deficit hawk George Voinovich (R-OH) recently broke with his Party and voted for helping small businesses with tax cuts. On federal income tax rates, the nation needs him again-he can be the new poster boy for bipartisanship-a rare breed this decade. He could at least allow the issue to come to the Senate floor for discussion by being the 60th vote in favor of debate.
There is room to maneuver: Ohio's John Boehner, the House Republican Leader and would-be Speaker, said he'd vote for tax breaks for the middle class without the wealthy if that's the only choice. There is consensus by both parties that the sluggish economy makes this the wrong time to raise taxes on the middle class.
Republicans portray the Bush tax cuts as similar to President John F. Kennedy's. That is a poor analogy. Kennedy cut the top tax rate from an exorbitant 91% to 70%. In contrast, Bush cut the top tax rate from a historically low 39.6% to 35%. By increasing enforcement and cracking down on loopholes, including the use of foreign subsidiaries for tax evasion, Kennedy increased government revenue. On the other hand, the Bush rich tax cuts will cost the nation $700 billion dollars in government revenue, and Republicans are fighting limiting outsourcing and foreign loopholes. In part due to a smart taxation policy, Kennedy created 1.2 million jobs per year in office; Bush was losing 700,000 jobs a month during his last year.
"Trickle down" economics has not worked since Herbert Hoover tried it. Millionaires save more of their income gained by tax cuts. Middle class families spend more. Every dollar devoted to the middle class causes the economy to grow three times faster than a dollar for the rich, according to CBO research located by our policy analyst Varun Saxena, who hails from Dublin, Ohio. Lower taxes for the rich leave deficits that must be paid for by the middle class taking the very money we'd give working families.
At a press conference on September 10, President Obama asked, "Why would we borrow money on policies that won't help the economy and help people who don't need help?"
It's already an odd alliance - Obama and Boehner, though only if both are pushed to the brink. Sen. Voinovich's vote in favor of debate would be a vote to end Washington's culture of partisanship and gridlock.
Robert Weiner, Washington, DC, is a former White House spokesman and communications director for House Government Operations Committee; Varun Saxena, from Dublin Ohio, is policy analyst at Robert Weiner Associates
DEMOCRATIC VERSUS REPUBLICAN PRESIDENTS'
ECONOMIC INDICATORS
In six major criteria -- GDP growth, per capita income growth, job creation, unemployment reduction, inflation reduction, and federal deficit reduction for the ten post-World War II presidencies until Bush, there is a record to track the reality of Democratic versus Republican economic success.
Democrats
- President Obama passed the American Recovery and Reinvestment Act, and the Congressional Budget Office estimates that it saved as many as three million jobs. Eight million Americans lost their jobs during the recession that he inherited, but the economy is recovering, and has experienced eight consecutive months of private sector job growth.
- Lyndon B. Johnson's "Great Society" created robust economic expansion, first in both GDP and personal income growth. He also reduced unemployment from 5.3% to 3.4%. Economic growth remained robust through most of LBJ's presidency.
- John F. Kennedy campaigned on the idea of getting America moving again, and he did. Under Kennedy, America entered its largest sustained expansion since WWII. GDP and personal income growth were second only to those under Johnson, all with minimal inflation.
- The economy added 10 million jobs under Jimmy Carter despite high inflation; Carter ranks first in job creation next to Clinton during just four years in office. Carter also reduced government spending as a percentage of GDP.
- Harry Truman's second term saw the fastest GDP growth and the sharpest reduction in unemployment of any president since Roosevelt (of course, FDR's post Hoover-depression New Deal jobs are first).
Republicans
- George W. Bush created only 3 million jobs in eight years the slowest rate of job creation since the government began keeping records. In addition, he added 4 trillion dollars to the deficit, and left office with the nation in a financial crisis that lead to the deepest recession since the Great Depression.
- Ronald Reagan focused on reducing the cost of capital through cutting tax bracket highs for the rich and reducing the size and scope of government. But, instead of lowering spending, Reagan shifted money to the military (i.e. Star Wars) and the deficit tripled with the tax cuts and military spending as under Bush II.
- Under Gerald Ford, the deficit soared and the unemployment rate grew from 5.3% to 8.3% in just 2 years. His "WIN" (Whip Inflation Now) buttons were no match for economic inactivity.
- It was under Richard Nixon that inflation started to spiral out of control, from 4.4% to 8.6%, and the deficit shot up from $2.8 billion to $73.7 billion.
- The Eisenhower years were characterized by slow growth (2.27% annualized GDP growth) and relatively high unemployment (7.7% at end of term).
- George H. W. Bush had the poorest record for both GDP and income growth. During his single term, the deficit ballooned (from $152 billion to $255 billion) more than under every president but his son and Ford.
(Sources: White House Office of Management and Budget (OMB), U.S. Department of Labor (DOL), and White House Council of Economic Advisors)
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